FocalTech - Annual Report 2020 | FinancialReports.eu

FocalTech Systems Co., Ltd. Financial Statements for the Years Ended December 31, 2020 and 2019

This is the translation of the financial statements. CPAs do not audit or review on this translation.

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders FocalTech Systems Co., Ltd.

Opinion

We have audited the accompanying balance sheets of FocalTech Systems Co., Ltd. (the “Company”) as of December 31, 2020 and 2019, and the related statements of comprehensive income, of changes in equity and of cash flows for the years ended December 31, 2020 and 2019, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Company’s financial statements in the current period are stated as follows:

Sales Revenue

The sales revenue of Integrated Driver Controller is the main indicator of financial and business performance evaluated by investors and the management. It possibly exist the pressure to achieve the financial target, and it might result in the risk of the occurrence of sales revenue. Therefore, the sales revenue of Integrated Driver Controller is listed in the Key Audit Matters of 2020.

Refer to Notes 4,21 for the accounting policy, accounting estimation and disclosure information. Our audit procedures related to the abovementioned Key Audit Matters included the following:

We evaluated the design of internal control related to sales and collection cycle and the implement of the internal control.
We obtained customer ranking list in 2020, and analyze the differences of customers and its sales amount.
We analyzed if the sales quantities, sales revenue and gross margin by products existed material exception.
We sampled purchase orders, shipping documents bills of lading, and collection records in revenue breakdown to ensure the occurrence of sales revenue.

Responsibilities of Corporate Management and Governance hierarchy For the Financial Statements

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Management Level is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management level is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Corporate governance level (including members of the Audit Committee) is responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision, and performance of the audit. We remain solely responsible for our audit opinion.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2020 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Shiow-Ming Shue and Chih-Ming Shao.

Deloitte & Touche Taipei, Taiwan Republic of China

March 29, 2021

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. BALANCE SHEETS DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Par Value)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 4 and 6) Trade receivables, net (Note 4 , 9 and 29) Inventories (Note 4 and 10) Other financial assets (Note 4 and 8) Other current assets (Note 22and 29) Total current assets NON-CURRENT ASSETS Financial asset at fair value through profit or loss - non-current (Note 4 and 7 ) Investments accounted for using equity method (Note 4 and 11) Property, plant and equipment (Note 4 and 12) Goodwill (Notes 4 , 5 and 13) Other intangible assets (Notes 4 and 14) Deferred income tax assets (Notes 4 and 22) Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Trade payables (Note 16 and 29) Other payables (Note 17) Current tax liabilities (Note 4 and 22) Other current liabilities(Note 20 and 29) Total current liabilities NON-CURRENT LIABILITIES Deferred income tax liabilities (Notes 4 and 22) Net defined benefit liabilities - non-current (Notes 4 and 18) Guarantee deposits received Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 4 , 19 and 24) Share capital Ordinary shares Capital surplus Additional paid-in capital Treasury shares Changes in ownership interests in subsidiaries Employee share options Employee share options - expired Total capital surplus Undistributed earnings (deficits to be offset) Other equity Exchange differences from translating the financial statements of foreign operations Unrealized loss on financial assets at fair value through other comprehensive income Total other equity Treasury shares Total equity TOTAL		2020 Amount % $ 2,455,926 21 1,445,186 12 1,215,281 11 170,880 2 162,403 1 5,449,676 47 97,139 1 4,537,073 39 15,226 - 1,237,268 11 59,498 - 65,898 1 145,604 1 6,157,706 53 $ 11,607,382 100 $ 480,000 4 1,936,299 17 339,556 3 108,514 1 360,915 3 3,225,284 28 53,213 1 23,366 - 482,276 4 10,400 - 569,255 5 3,794,539 33 2,103,532 18 4,725,445 41 69,361 1 - - 14,903 - 33,933 - 4,843,642 42 1,012,301 8 (125,038) (1) 2,722 - (122,316) (1) (24,316) - 7,812,843 67 $ 11,607,382 100		2019
				Amount % $ 841,430 9 540,554 6 617,115 7 - - 241,020 3 2,240,119 25 27,849 - 5,121,499 58 19,408 - 1,237,268 14 75,107 1 101,745 1 112,550 1 6,695,426 75 $ 8,935,545 100 $ - - 700,543 8 190,912 2 - - 161,003 2 1,052,458 12 33,537 1 24,078 - 117,594 1 10,400 - 185,609 2 1,238,067 14 2,996,759 33 5,037,671 57 48,662 1 - - 25,510 - 33,534 - 5,145,377 58 (183,307) (2) 4,057 - 1,750 - 5,807 - (267,158) (3) 7,697,478 86 $ 8,935,545 100

The accompanying notes are an integral part of the financial statements.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

REVENUE (Note 4 ,20 and 29) COSTS OF SALES (Notes 4,10,21 and 29) GROSS PROFIT OPERATING EXPENSES (Notes 21,24, 26 and 29) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATIONS INCOME NON-OPERATING INCOME AND EXPENSES Finance costs (Note 21) Share of loss of subsidiaries and joint ventures(Note4) Interest income (Note 4) (Loss) gain on financial assets and liabilities at fair value through profit or loss (Notes 4) Loss on disposal of investments (Notes 4) Other gains and losses, net (Notes 29) Loss on foreign currency exchange(Note 4) Total non-operating income and expenses INCOME (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 22) NET INCOME (LOSS) OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Notes 4 and 18) Income tax related to items that will not be reclassified subsequently to profit or loss (Notes 4 and 22)		2020 Amount % $ 11,410,350 100 (8,811,546) (77) 2,598,804 23 (186,571) (2) (225,572) (2) (958,867) (8) (1,371,010) (12) 1,227,794 11 (1,892) - (16,072) - 6,297 - (2,484) - (40,928) (1) 21,144 - (17,880) - (51,815) (1) 1,175,979 10 (163,987) (1) 1,011,992 9 359 - (50) - 309 -		2019
				Amount % $ 2,901,766 100 (1,944,861) (67) 956,905 33 (102,450) (4) (157,957) (5) (625,866) (22) (886,273) (31) 70,632 2 (1,152) - (229,956) (8) 14,045 1 372 - - - 8,345 - (22,880) (1) (231,226) (8) (160,594) (6) (14,655) - (175,249) (6) 1,677 - (235) - 1,442 - (Continued)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Items that may be reclassified subsequently to profit or loss: Exchange differences from translating the financial statements of foreign operations (Notes 4) Total other comprehensive Loss (net of income tax) TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR EARNINGS (LOSS) PER SHARE (Note 23) Basic Diluted		2020	% (1) (1) 8		2019
		Amount $ (128,123) (127,814) $ 884,178 $ 3.97 $ 3.73			Amount $ (141,357) (139,915) $ (315,164) $ (0.63)	% (5) (5) (11)

The accompanying notes are an integral part of the financial statements.

(Concluded)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2019 Legal reserve used to cover accumulated deficits Capital surplus used to cover accumulated deficits Cash distribution from additional paid-in capital Net loss for the year ended December 31, 2019 Other comprehensive income for the year ended December 31, 2019, net of income tax Total comprehensive income (loss) for the year ended December 31, 2019 Treasury stock transferred to employees (Note 19 and 24) Decrease in ownership interests in subsidiaries (Note 25) Compensation cost of employee share options (Note 19 and 24) Issue of ordinary shares under employee share options (Note 19 and 24) BALANCE AT DECEMBER 31, 2019 Capital surplus used to cover accumulated deficits Cash distribution from additional paid-in capital Net income for the year ended December 31, 2020 Other comprehensive loss for the year ended December 31, 2020, net of income tax Total comprehensive income (loss) for the year ended December 31, 2020 Reduction of capital (Note 19) Treasury stock transferred to employees (Note 19 and 24) Compensation cost of employee share options (Note 19 and 24) Issue of ordinary shares under employee share options (Note 19 and 24) BALANCE AT DECEMBER 31, 2020		Share Capital Ordinary Shares $ 2,987,432 - - - - - - - - - 9,327 2,996,759 - - - - - (899,721) - - 6,494 $ 2,103,532	Capital Surplus $ 6,551,481 - (1,248,601) (150,000) - - - - (20,448) 9,787 3,158 5,145,377 (183,307) (150,000) - - - - 1,228 21,279 9,065 $ 4,843,642		Retained Earnings(Accumulated Deficits) Undistributed Earnings (Deficits Legal Reserve to be offset) $ 186,154 $ (1,434,755) (186,154) 186,154 - 1,248,601 - - - (175,249) - 1,442 - (173,807) - - - (9,500) - - - - - (183,307) - 183,307 - - - 1,011,992 - 309 - 1,012,301 - - - - - - - - $ - $ 1,012,301	Retained Earnings(Accumulated Deficits) Undistributed Earnings (Deficits Legal Reserve to be offset) $ 186,154 $ (1,434,755) (186,154) 186,154 - 1,248,601 - - - (175,249) - 1,442 - (173,807) - - - (9,500) - - - - - (183,307) - 183,307 - - - 1,011,992 - 309 - 1,012,301 - - - - - - - - $ - $ 1,012,301		Other Equity Exchange Differences from Translating Financial Statement of Unrealized gains(losses) from financial assets measured at fair value through other comprehensive Foreign Operations income $ 149,454 $ (2,290) - - - - - - - - (145,397) 4,040 (145,397) 4,040 - - - - - - - - 4,057 1,750 - - - - - - (129,095) 972 (129,095) 972 - - - - - - - - $ (125,038) $ 2,722	Treasury Shares $ (393,203) - - - - - - 126,045 - - - (267,158) - - - - - 5,191 237,651 - - $ (24,316)		Total Equity $ 8,044,273 - - (150,000) (175,249) (139,915) (315,164) 126,045 (29,948) 9,787 12,485 7,697,478 - (150,000) 1,011,992 (127,814) 884,178 (894,530) 238,879 21,279 15,559 $ 7,812,843
					Legal Reserve $ 186,154 (186,154) - - - - - - - - - - - - - - - - - - - $ -			Exchange Differences from Translating Financial Statement of U f Foreign Operations $ 149,454 - - - - (145,397) (145,397) - - - - 4,057 - - - (129,095) (129,095) - - - - $ (125,038)

The accompanying notes are an integral part of the financial statements.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax from continuing operation Adjustments for: Depreciation expenses Amortization expenses Loss (gain) on financial assets and liabilities at fair value through profit or loss Finance costs Interest income Compensation cost of employee share options Share of loss of subsidiaries and joint ventures Loss on disposal of investments Reversal of write-down of inventories Changes in operating assets and liabilities Increase in financial assets mandatorily classified as at fair value through profit or loss Trade receivables Inventories Other current assets Trade payables Other payables Other current liabilities Net defined benefit liabilities Cash generated from operations Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of investments accounted for using equity method Proceeds from disposal of investments accounted for using equity method Proceeds from the capital reduction of investments accounted for using the equity method Purchase of property, plant and equipment Increase in other financial assets Increases in other non-current assets Interest received Net cash generated (used) from investing activities	2020 $ 1,175,979 10,567 15,609 2,484 1,892 (6,297) 12,433 16,072 40,928 (131,157) (112,702) (904,632) (467,009) 77,154 1,235,756 148,644 199,706 (353) 1,315,074 (1,686) - 1,313,388 (4,970) 2,847 451,200 (6,385) (170,880) (33,054) 7,760 246,518	2019 $ (160,594) 14,286 16,254 (372) 1,152 (14,045) 4,934 229,956 - (70,676) (5,348) 76,101 (10,474) (218,289) 394,331 5,265 146,943 (341) 409,083 (1,152) (1,199) 406,732 (90,885) - - (2,941) - (99,425) 13,156 (180,095) (Continued)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM FINANCING ACTIVITIES Increases in short-term borrowings Increase in guarantee deposits received Cash dividends paid Capital reduction payments to shareholders Proceeds from issuance ordinary shares under employee share options Treasury stock transferred to employees Net cash generated in financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2020 $ 480,000 364,682 (150,000) (894,530) 15,559 238,879 54,590 1,614,496 841,430 $ 2,455,926	2019 $ - 11,554 (150,000) - 12,485 126,045 84 226,721 614,709 $ 841,430

The accompanying notes are an integral part of the financial statements.

(Concluded)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

FOCALTECH SYSTEMS CO., LTD.

1. GENERAL INFORMATION

FocalTech Systems Co., Ltd. (the “FocalTech” or the “Company”), formerly named as Orise Technology Co., Ltd., was incorporated in the Republic of China (“ROC”) in January 2006 and moved to Hsinchu Science Park in April in the same year. The Company’s shares have been listed on the Taiwan Stock Exchange (“TSE”) since July 2007. On January 2, 2015, the Company acquired FocalTech Corporation, Ltd. through a share swap and renamed on January 17, 2015. This acquisition was comprehensively considered as a reverse merger, where FocalTech Corporation, Ltd. was treated as the acquirer in the financial statements. The Company is mainly engaged in research, development, design, manufacturing, and sales of solutions regarding to human and machine interface devices, such as Display Driver IC, Touch Control IC and so on.

The financial statements are presented in the Company’s functional currency, New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Company’s board of directors on February 4, 2021.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, “IFRSs”)endorsed and issued into effect by the Financial Supervisory Commission (FSC).

The initial application of the amendments to the IFRSs endorsed and issued into effect by the FSC did not have significant impact on the Company’s accounting policies:

b. The IFRSs endorsed by the Financial Supervisory Commission (FSC) for application starting from 2021

New, Revised or Amended Standards and Interpretations Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform - Phase 2”	Effective Date Issued by IASB
	Effective immediately upon promulgation by the IASB January 1, 2021

The Company assessed the application of abovementioned standards and interpretations do not have significant impact on the Company’s accounting policies.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date New, Revised or Amended Standards and Interpretations Announced by IASB (Note 1) “Annual Improvements to IFRS Standards 2018-2020” January 1, 2022 (Note 2) Amendments to IFRS 3 “Reference to the Conceptual Framework” January 1, 2022 (Note 3) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2023 Amendments to IFRS 17 January 1, 2023 Amendments to IAS 1 “Classification of Liabilities as Current or January 1, 2023 Non-current” Amendments to IAS 1 “Disclosure of Accounting Policies” January 1, 2023 (Note 6) Amendments to IAS 8 “Definition of Accounting Estimates” January 1, 2023 (Note 7) Amendments to IAS 16 “Property, Plant and Equipment - Proceeds January 1, 2022 (Note 4) before Intended Use” Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a January 1, 2022 (Note 5) Contract”

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.
Note 3: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.
Note 4: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.
Note 5: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.
Note 6: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.
Note 7: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the annual reporting period beginning on or after January 1, 2023.

As of the date the financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The present Financial Report has been prepare in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

b. Basis of preparation

The financial statements are prepared on the historical cost basis, except for the financial instruments measured at fair value and the net defined benefit liabilities recognized in the fair value of the estimated assets, and explained in the accounting policies below.

The evaluation of fair value could be classified into level 1 to level 3 based on the degree of the observable intensity and importance of related input value:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.

When preparing the financial statements, the Company accounts for subsidiaries by using the equity method. In order to maintain the consistency of amounts of net income, other comprehensive income and equity attributable to shareholders of the parent between the consolidated financial statements and parent company financial statements, the differences of the accounting treatment between the parent company only basis and the consolidated basis are adjusted by the accounts of investments accounted for using equity method, share of profits of subsidiaries and share of other comprehensive income of subsidiaries in the parent company only financial statements.

c. Standards in differentiating current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within twelve months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

1) Assets expected to be realized within 12 months after the reporting period; and
2) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Those not as aforementioned current assets or current liabilities are classified as non-current assets or non-current liabilities.

d. Foreign currencies

In preparing the financial statements, transactions in currencies other than the Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting financial statements, the functional currencies of the Company and the Group entities (including subsidiaries in other countries that use currency different from the currency of the Company) are translated into the presentation currency - New Taiwan dollars as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

e. Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

f. Investments in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

A subsidiary is an entity (including a structured entity) that is controlled by the Company.

Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. The Company also recognizes the changes in the Company’s share of equity of subsidiaries.

Changes in the Company’s ownership interest in a subsidiary that do not result in the Company losing the control of the subsidiary are accounted for as equity transactions. The Company recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Company’s share of loss of a subsidiary exceeds its interest in that subsidiary (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further loss, if any.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the investee’s financial statements as a whole. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes a reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount (net of amortization or depreciation) before any impairment loss recognized. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

Profit or loss resulting from downstream transactions is eliminated in full in the parent company only financial statements. Profit and loss resulting from upstream transactions and transactions between subsidiaries is recognized only to the extents that are not related to the interests between the Company and subsidiaries.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

g. Property, plant and equipment

Property, plant and equipment are initially measured at cost, and subsequently measured at cost less accumulated depreciation.

Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

h. Goodwill

Goodwill arising from the acquisition of a business is carried at cost, and subsequently measured at cost less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

i. Intangible assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset are recognized in profit or loss.

j. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs to.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

k. Financial instruments

Financial assets and financial liabilities are recognized when the company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

i) Measurement category

The Company’s financial assets include those measured at FVTPL, and at amortized cost.

A. Financial asset at FVTPL

The equity instruments that are not specified as FVTOCI and debt instruments that do not meet the criteria of amortized cost or FVTOCI are mandatorily required to be measured at FVTPL.

Any dividends, interest earned and gain or loss arising from the remeasurement is recognized in profit or loss at fair value. The determination methodology of fair value of financial instruments states in Note 28.

B. Financial assets at amortized cost

Financial assets that meet both two following conditions will subsequently be measured at amortized cost:

(1) The objective of the business model to hold the financial asset is to collect contractual cash flows; and
(2) The cash flows from contractual terms of the financial asset on specified dates are solely matched for payments of principal and interests on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, account receivables at amortized cost, other financial assets, and refundable deposits, are measured at amortized cost, which equals to gross carrying amount determined

This is the translation of the financial statements. CPAs do not audit or review on this translation.

by the effective interest method, subtracting any impairment loss. Foreign exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset.

Cash equivalents include time deposits with original maturities within 3 months from obtaining date, high liquidation level, readily convertible to a known amount of cash at any time, and low risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

ii) Impairment of financial assets

At the end of each reporting period, the impairment loss is recognized by expected credit loss method for financial assets at amortized cost (including trade receivables).

The loss allowance for trade receivables is determined by the expected credit losses over the lifetime. For other financial assets at amortized cost, if the credit risk on the financial instrument has not increased significantly after initial recognition, a loss allowance is determined by the expected credit losses resulting from the possible default events within 12 months after the reporting date. If, on the other hand, there has been a significant increase in credit risk after initial recognition, a loss allowance is determined by the expected credit losses resulting from all possible default events over the expected life of a financial instrument.

Expected credit losses (ECLS) reflect the weighted average of credit losses with the respective risks of default occurring as the weights. 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. In contrast, Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

All impairment loss of the financial instruments with a corresponding adjustment to their carrying amount are through an allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial asset.

iii) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

When a financial asset carried at amortized cost is derecognized in its entirety, the difference between the asset’s carrying amount and the consideration is recognized in profit or loss.

2) Equity instruments

Debt and equity instruments issued by the company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by the company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

3) Financial liabilities

i) Subsequent measurement

All the financial liabilities are measured by amortized cost using the effective interest method.

ii) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

l. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

m. Revenue recognition

The Company recognizes revenue when customer’s contract obligations are satisfied.

Revenue comes from sales of human and machine interface devices ICs. Revenue is recognized when the ICs start to be shipped or are delivered to the specific locations instructed by customers, at which time the customer has full discretion over the ICs. Revenue and trade receivables are recognized concurrently.

The Company considers varying contractual terms to estimate sales returns and recognize refund liabilities, which is classified under other payables.

n. Lease

The Company evaluates if the contract belongs to or includes the lease the commencement date.

The Company as lessee

Except for the leases of low-value asset or short-term leases recognized as expenses on a straight-line basis, the Company recognizes right-of-use assets and lease liabilities for all leases on the balance sheets from the commencement date.

o. Employee benefits
1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost, including current service cost and net interest on the net defined benefit liability (asset,) is recognized as employee benefits expense in the period it occurs. Remeasurement, comprising

This is the translation of the financial statements. CPAs do not audit or review on this translation.

actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Company’s defined benefit plan.

p. Share-based payment arrangements

Equity-settled and share-based payment arrangements granted to employees

The fair value at the grant date of the equity-settled and share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s optimal estimate number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options.

q. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

The tax on unappropriated earnings according to the Income Tax Law should be accrued in the year when the resolution regarding to the appropriated earnings is made in the shareholder meeting.

Any adjustment of prior years’ tax liability is counted in the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. In addition, a deferred tax liability is not recognized on taxable temporary difference arising from initial recognition of goodwill.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the

This is the translation of the financial statements. CPAs do not audit or review on this translation.

manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the deferred tax are recognized in other comprehensive income.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Impairment of Goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalent (time deposits with original maturities less than three months)		December 31	December 31
		2020 $ 381 2,455,545 - $ 2,455,926	2019 $ 377 421,333 419,720 $ 841,430

The market rate intervals of cash in bank at the end of the reporting period were as follows:

Demand deposits Time deposits	December 31
	2020 2019 0.001%-0.35% 0.001%-0.35% - 2.2%-2.24%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS-NON-CURRENT

	December	31
2020			2019

Mandatorily at fair value through profit or loss (FVTPL)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Listed preferred shares Private Funds	$ 72,186 24,953 $ 97,139	$ 10,931 16,918 $ 27,849

8. OTHER FINANCIAL ASSETS

Time deposits with original maturities less than three months Market rate intervals

	December 31	December 31
	2020 $ 170,880 0.37%	2019 $ - -

9. TRADE RECEIVABLES, NET

Trade receivables		December 31	December 31
		2020 $ 1,455,186	2019 $ 540,554

The average credit period on sales of goods was 60-120 days. In order to minimize credit risk, management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowances are made for irrecoverable amounts. In this regard, management believes the Company’s credit risk was significantly reduced.

The Company recognizes the allowance loss for accounts receivable based on expected credit losses during the duration. The expected credit losses on trade receivables are estimated by using an allowance matrix which references customer default records, customer’s current financial position, and general economic conditions of the industry. Due to the past experiences, there is no significant difference among the loss patterns of different customer groups. Therefore, the allowance matrix does not further distinguish the customer groups, and only sets the expected credit loss rate based on the overdue days of trade receivable.

The following table details the loss allowance of trade receivables based on the Company’s allowance matrix.

December 31, 2020

Expected credit loss rate Gross carrying amount and Amortized cost December 31, 2019 Expected credit loss rate Gross carrying amount and Amortized cost	Non Past Due 0% $1,404,771 Non Past Due 0% $540,180		Overdue 1-60 Days 0% $ 40,401 Overdue 1-60 Days 0% $ 374	Overdue 61-180 Days 0% $ 14 Overdue 61-180 Days 0% $ -	Overdue Over 181 Days 0% $ - Overdue Over 181 Days 0% $ -		Total
							0% $ 1,445,186 Total
							0% $ 540,554

This is the translation of the financial statements. CPAs do not audit or review on this translation.

10. INVENTORIES

Finished goods Work in progress Raw materials and supplies		December 31	December 31
		2020 $ 311,159 812,109 92,013 $ 1,215,281	2019 $ 198,145 304,486 114,484 $ 617,115

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2020 and 2019 was $8,811,546 thousand and $1,944,861 thousand, included gain from price recovery of inventory of $131,157 thousand and $70,676 thousand for the years ended December 31, 2020 and 2019, respectively.

11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries Unlisted companies FocalTech Corporation, Ltd. FocalTech Electronics, Ltd. FocalTech Smart Sensors, Ltd. Unlisted companies FocalTech Corporation, Ltd. FocalTech Electronics, Ltd. FocalTech Smart Sensors, Ltd.(a)		December 31
		2020 2019 $ 4,537,073 $ 5,121,499 December 31
		2020 2019 $ 2,974,195 $ 3,002,990 1,562,878 2,071,743 - 46,766 $ 4,537,073 $ 5,121,499 Proportion of Ownership and Voting Rights
		December 31
		2020 2019 100% 100% 100% 100% - 50.06%

a. FocalTech Smart Sensors, Ltd. is owned solely by FocalTech Electronics Co., Ltd. in 2020, which was originally held by The Company and FocalTech Electronics Co., Ltd.

The share of profit or loss and other comprehensive income of these subsidiaries accounted for using the equity method recognized in 2019 and 2020 financial statements were based on the audited subsidiaries’ financial statements of the corresponding periods.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

11. PROPERTY, PLANT AND EQUIPMENT

Development Equipment Office Equipment Leasehold Improve- ments Cost Balance at January 1, 2019 $ 70,226 $ 304 $ 16,878 Additions 2,941 - - Balance at December 31, 2019 $ 73,167 $ 304 $ 16,878 Accumulated depreciation Balance at January 1, 2019 $ 39,991 $ 231 $ 16,433 Depreciation 13,768 73 445 Balance at December 31, 2019 $ 53,759 $ 304 $ 16,878 Carrying amounts at December 31, 2019 $ 19,408 $ - $ - Cost Balance at January 1, 2020 $ 73,167 $ 304 $ 16,878 Additions 6,385 - - Disposals ( 5,001) - - Balance at December 31, 2020 $ 74,551 $ 304 $ 16,878 Accumulated depreciation Balance at January 1, 2020 $ 53,759 $ 304 $ 16,878 Depreciation 10,567 - - Disposals ( 5,001) - - Balance at December 31, 2020 $ 59,325 $ 304 $ 16,878 Carrying amounts at December 31, 2020 $ 15,226 $ - $ -	Total $ 87,408 2,941
	$ 90,349
	$ 56,655 14,286
	$ 70,941
	$ 19,408
	$ 90,349 6,385 ( 5,001) $ 91,733
	$ 70,941 10,567 ( 5,001) $ 76,507
	$ 15,226

Property, plant and equipment were depreciated on a straight-line basis over the estimated useful lives as follows:

Development equipment 4 years Office equipment 4 years Leasehold improvements 1-4 years

Property, plant and equipment were not been pledged as collateral.

13. GOODWILL

Beginning balance Impairment loss Ending balance	For the Year Ended 2020 $ 1,237,268 - $ 1,237,268	For the Year Ended 2020 $ 1,237,268 - $ 1,237,268	December 31
		2020 $ 1,237,268 - $ 1,237,268	2019 $ 1,237,268 - $ 1,237,268

Considering the synergy of integration of LCD driver and touch controller under the industry trend, the reverse merger was triggered by FocalTech Corporation, Ltd. on January 2, 2015, resulting the goodwill of $3,237,268 thousand. In 2018, the impacts of market improper competition and the shortage of wafer supply made the company a serious market share decline, which is expected to influence the market shares and gross margins in the future. Therefore, the recoverable amount from IDC (Integrated Driver Controller) less than the carrying value so the Company recognized the impairment loss of $2,000,000 thousand. In 2019, based on the market growth and market share gain in smartphone market, the Group estimated cash flows from sales of IDC (Integrated Driver Controller), and the recoverable amount exceeded the carrying

This is the translation of the financial statements. CPAs do not audit or review on this translation.

value. Therefore, the Group did not recognize any impairment on goodwill.

The recoverable amount is calculated by IDC projected net cash flows, discounted at 15.45% and 10.66% for the years ended December 31, 2020 and 2019, under the assumptions of management team judgments and historical experiences with regard to future growth rates and gross margin .

14. OTHER INTANGIBLE ASSETS

Licenses and Franchises Cost Balance at January 1, 2019 and December 31, 2019 $ 18,657 Accumulated amortization Balance at January 1, 2019 $ 17,262 Amortization expense 840 Balance at December 31, 2019 $ 18,102 Carrying amounts at December 31, 2019 $ 555 Cost Balance at January 1, 2020 and December 31, 2020 $ 18,657 Accumulated amortization Balance at January 1, 2020 $ 18,102 Amortization expense 423 Balance at December 31, 2020 $ 18,525 Carrying amounts at December 31, 2020 $ 132	Software $ 8,445 $ 8,217 228 $ 8,445 $- $ 8,445 $ 8,445 - $ 8,445 $-	Patents Trademark $ 76,478 $ 74,000 $ 31,140 $ 29,600 7,786 7,400 $ 38,926 $ 37,000 $ 37,552 $ 37,000 $ 76,478 $ 74,000 $ 38,926 $ 37,000 7,786 7,400 $ 46,712 $ 44,400 $ 29,766 $ 29,600	Total $ 177,580 $ 86,219 16,254 $ 102,473 $ 75,107 $ 177,580 $ 102,473 15,609 $ 118,082 $ 59,498

Other intangible assets were amortized on a straight-line basis over the estimated useful lives as follows:

Licenses and franchises 5 years Software 3 years Patents 9-10 years Trademark 10 years

15. SHORT-TERM BORROWINGS

Unsecured borrowings Line of credit borrowings Market rate intervals		December 31	December 31
		2020 $ 480,000 0.88%~1.06%	2019 $ - -

This is the translation of the financial statements. CPAs do not audit or review on this translation.

16. TRADE PAYABLES

Trade payables Trade payables-related party		December 31	December 31
		2020 $ 1,397,089 539,210 $ 1,936,299	2019 $ 668,113 32,430 $ 700,543

The average credit period on purchases was 30-60 days. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

17. OTHER PAYABLES

Payable for salaries and bonus Payable for labor, health and social insurance Reserve for litigations Payable for professional services and others		December 31	December 31
		2020 $ 238,059 12,450 32,052 56,995 $ 339,556	2019 $ 110,306 12,450 25,806 42,350 $ 190,912

18. RETIREMENT BENEFIT

a. Defined contribution plans

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

b. Defined benefit plans

The defined benefit plan adopted by the Company in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability		December 31	December 31
	(	2020 $ 42,275 18,909) ( $ 23,366	2019 $ 45,235 21,157) $ 24,078

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Movements in net defined benefit liability were as follows:

	Present Value of	Present Value of
	the Defined					Net Defined
		Benefit		Fair Value of			Benefit
	Obligation		the Plan Assets			Liability (Asset)
Balance at January 1, 2019	$	45,590	(	$	19,494)	$	26,096
Service cost
Current service cost		125			-		125
Net interest expense (income)		570	(		248)		322
Recognized in profit or loss		695	(		248)		447
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-	(		627 )	(	627 )
Actuarial loss - changes in financial
assumptions		1,421			-		1,421
Actuarial loss - experience adjustments	(	2,471)			-	(	2,471)
Recognized in other comprehensive income	(	1,050)	(		627)	(	1,677)
Contributions from the employer		-	(		788)	(	788)
Balance at December 31, 2019		45,235	(		21,157)		24,078
Service cost
Current service cost		126			-		126
Net interest expense (income)		452	(		215)		237
Recognized in profit or loss		578	(		215)		363
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-	(		619 )	(	619 )
Actuarial loss - changes in financial
assumptions		1,151			-		1,151
Actuarial loss -demographic assumptions		1,436			-		1,436
Actuarial loss - experience adjustments	(	2,327)			-	(	2,327)
Recognized in other comprehensive income		260	(		619)	(	359)
Contributions from the employer		-	(		716 )	(	716 )
Benefits paid	(	3,798)			3,798		-
Balance at December 31, 2020	$	42,275	(	$	18,909)	$	23,366

Through the defined benefit plans under the Labor Standards Law, the Company is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected rate of salary increase	December 31
	2020 2019 0.8% 1% 4.5% 4.5%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 1% increase 1% decrease		December 31	December 31
		2019 ($ 1,501) ($ 1,566) ($ 6,441) ($ 5,567)	2019 ($ 1,422) ($ 1,481) ($ 6,141) ($ 5,334)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year The average duration of the defined benefit obligation 19. EQUITY a. Share capital Ordinary shares (NT$10 par value per share)		December	31
		2020 $ 717 16.1 years	2019 $ 770 14.9 years

Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued b. Capital surplus Additional Paid-in Capital (1) Treasury Shares (1) BALANCE, JANUARY 1, 2019 $ 6,422,355 $ 40,868 Capital surplus used to cover accumulated deficits ( 1,248,601 ) - Cash distribution from additional paid-in capital ( 150,000 ) -	Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued b. Capital surplus Additional Paid-in Capital (1) Treasury Shares (1) BALANCE, JANUARY 1, 2019 $ 6,422,355 $ 40,868 Capital surplus used to cover accumulated deficits ( 1,248,601 ) - Cash distribution from additional paid-in capital ( 150,000 ) -	Changes in ownership interests in subsidiaries (2)		December 31	December 31

				Employee Share Options (3)
$ 6,422,355 ( 1,248,601 ) ( 150,000 )	$ 40,868 - -	($0,0020,448) (-) (-)	($0,047,476) (-) (-)		($0,020,334) (-) (-)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Changes in ownership interests in subsidiaries Employee treasury share vested Compensation cost of employee share options Issue of ordinary shares under employee share options Employee share options expired BALANCE AT DECEMBER 31, 2019 Capital surplus used to cover accumulated deficits ( Cash distribution from additional paid-in capital ( Employee treasury share vested Treasury shares transferred to employees Compensation cost of employee share options Issue of ordinary shares under employee share options Employee share options expired BALANCE AT DECEMBER 31, 2020	- - - 7,794 - - 13,917 - - - 5,037,671 48,662 183,307 ) - 150,000 ) - - 19,471 - 1,228 - - 21,081 - - - $ 4,725,445 $ 69,361	($ 0,020,448) (-) (-) (-) ( -) ($ 0,0-) (-) (-) (-) (-) (-) (-) ( -) ($-)	(-) (-)($ 0,020,448) ($ 0,007,794) (-) (-) ($ 0,009,787) (-) ($ 0,009,787) ($ 0,010,759) (-) ($ 0,03,158) ( 13,200) (13,200) ( -) ($ 0,025,510) ($ 0,033,534) ($5,145,377) (-) (-)($ 0,183,307) (-) (-)($ 0,150,000) ($ 0,019,471) (-) (-) (-) (-) (1,228) 21,279 (-) 21,279 ($ 0,012,016) (-) ($ 0,09,065) ($ 0,000,399) (399) ( -) ($ 14,903) ($ 33,933) ($ 4,843,642)

1) This type of capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or converted to share capital (at a certain percentage of the Company’s capital surplus annually).
2) This type of capital surplus may be used to offset a deficit.
3) This type of capital surplus cannot be used for any purposes.
c. Retained earnings and dividend policy

The amendments to the Company’s Articles of Incorporation had been approved by the Company’s shareholders in its meeting held on June 20, 2019, which stipulate that earnings distribution may be made on a quarterly basis after the close of each quarter.

The Company’s amended Articles of Incorporation provides that, when distributing earnings belonging to the first three quarter, the Company shall first estimate and reserve taxes to be paid, offset its deficits, estimate and reserve employees’ compensation and remuneration to directors, then set aside a legal capital reserve at 10% of the remaining earnings and set aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings at the beginning shall be used by the Company’s board of directors as the basis for proposing a distribution plan after the Company’s board of directors consider operational situation and retain proper amount. By the way of stock dividends, it shall be approved by the Company’s shareholders in its meeting; by the way of cash dividends, it shall be approved by the Company’s board of directors.

When distributing annual earnings, the Company shall pay taxes, offset its losses, set aside 10% as legal reserve, then set aside or reverse a special reserve in accordance with relevant laws or regulations. The Board of Directors shall prepare a distribution proposal for the remaining earnings plus the unappropriated retained earnings of previous years. Earnings distribution may be made in the form of shares after an approved resolution made by the shareholders’ meeting. Pursuant to the Company Act, the distributable dividends and bonuses or the legal reserve and the capital reserve (stipulated in Article 241, Paragraph 1 of the Company Act) in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors; and in addition to a report of such distribution shall be submitted to the shareholders’ meeting.

Before the amendment of the Company’s Articles of Incorporation on shareholders’ meeting on June 20, 2019, the earing distribution is only allowed after yearly closing by the approval of the shareholders’ meeting. The rest retained earnings and dividends policy are consistent.

On June 20, 2020, the shareholders’ meeting resolved that the Company’s Articles of Incorporation amended on June 20, 2019 shall be revised back to the previous version.

See Note 21(d) for policy stipulated in the Articles of Incorporation regarding to the remuneration for

This is the translation of the financial statements. CPAs do not audit or review on this translation.

employees and directors.

Considering current and future development plans, investment conditions, capital requirements, and market competition situations, and shareholder benefits, The Company would appropriate the dividends to the shareholders not less than 10% of the current year’s earnings. The dividends could be paid in cash or shares. The cash portion should be equal or more than 10% of the total dividends. It is allowed not to distribute any cash dividend if the cash amount per share is less than NT 0.5.

Legal reserve should be appropriated from earnings until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

NT$186,154 thousand from legal reserve and NT$1,248,601 thousand from capital surplus for loss offsetting as well as the cash distribution of NT$150,000 thousand, i.e. NT$0.52010840 per share, from additional paid-in capital of share issue premium had been approved in the Company’s shareholders’ meeting on June 20, 2019.

NT$183,307 thousand from additional paid-in capital for loss offsetting as well as the cash distribution of NT$150,000 thousand, i.e. NT$0.50291032 per share, from additional paid-in capital of share issue premium had been approved in the Company’s shareholders’ meeting on June 20, 2020.

To increase the return on shareholders’ equity, it was approved for reduction of capital in the Company’s shareholders’ meeting on June 20, 2020. Company’s share capital was reduced by $899,721 thousand, and estimated to eliminate 89,972 thousand shares of the Company. Each share will be returned by $3 and the ratio of capital reduction is 30%. The reduction of capital was approved by Financial Supervisory Commission on September 2, 2020. The record date of capital reduction was September 8, 2020, and the date of completion of capitalization change registration was on September 14, 2020. The cash of capital reduction was returned to the company’ shareholders on October 28, 2020.

d. Treasury stock

	Shares
	(In Thousands)
Number of shares at January 1, 2019	(15,970)
Decrease during the period	(4,992)
Number of shares at December 31, 2019	(10,978)
Decrease during the period	( 9,681)
Decrease due to capital reduction during the period	(519)
Number of shares at December 31, 2020	(778)

The detailed information for other Shares Buy Back Programs could be found in Note 24 (b).

The treasury shares held by the company cannot be pledged and no dividend and voting right is attached in accordance with the Regulations of Securities and Exchange Act.

20. REVENUE

IC for human and machine interface devices	For the Year Ended December 31
	2020 2019 $ 11,366,680 $ 2,445,648

This is the translation of the financial statements. CPAs do not audit or review on this translation.

43,670 456,118 $ 11,410,350 $ 2,901,766

Service revenue

21.	Contract balances Contract liabilities (classified as current liabilities) Sales of goods NET INCOME		December 31	December 31
			2020 $ 106,683	2019 $ 2,998

For the Year Ended	For the Year Ended	For the Year Ended	December 31
2020 $ 1,078 814 $ 1,892 For the Year Ended			2019 $ 1,150 2 $ 1,152 December 31
2020 $ 10,567 15,609 $ 26,176 $ 722 25,454 $ 26,176 For the Year Ended			2019 $ 14,286 16,254 $ 30,540 $ 1,299 29,241 $ 30,540 December 31
	2020 $ 25,596 363 12,433 833,872 $ 872,264 $ 94,586 777,678 $ 872,264	2019 $ 26,189 447 4,934 647,418 $ 678,988 $ 83,197 595,791 $ 678,988

This is the translation of the financial statements. CPAs do not audit or review on this translation.

d. The remuneration to employees and directors

The Company stipulates to distribute employees’ compensation and remuneration to directors at the rates no less than 1% and no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration to directors. Due to the net loss before tax for the year ended December 31, 2019, there was no accrual for any remuneration to employees and directors. The accrued employees’ compensation and remuneration to directors for the year ended December 31, 2020 are as follows:

The remuneration to employees The remuneration to directors The remuneration to employees The remuneration to directors	December 31, 2020	December 31, 2020
	9.4% 0.6% December 31, 2020
		$123,450 $ 7,214

If there is a change in the proposed amounts after the annual financial statements were authorized for issue, the differences are recorded as a change in accounting estimate.

There is no difference between the actual amount of remuneration to employees and directors resolved and the amount of remuneration to employees and directors accounted for in 2020 financial statements.

Information on the employees’ compensation and remuneration to directors resolved by the Company’s board of directors are available on the Market Observation Post System website of the Taiwan Stock Exchange.

22. INCOME TAXES

a. Income tax expense (benefit) recognized in profit or loss

Current tax In respect of the current year Adjustments for prior years Deferred tax In respect of the current year Adjustments for prior years Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 108,514 - 108,514 54,139 1,334 55,473 $ 163,987	2019 $ - 1,199 1,199 14,308 ( 852) 13,456 $ 14,655

A reconciliation of accounting profit and income tax expense is as follows:

Income (loss) before tax from continuing operations Income tax expense (benefit) calculated at the statutory rate and the effective tax rate Nondeductible expenses in determining taxable income Tax effect of earnings to be distributed by subsidiaries	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $1,175,979 $ 164,637 5,730 21,734	2019 $ (160,594) $ (22,483) - 4,597

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Unrecognized temporary differences Adjustments for prior years’ tax Income tax expense recognized in profit or loss	(29,448) 1,334 $ 163,987	32,194 347 $ 14,655

The company’s research and development expenditure is expected to offset the corporate income tax by 30%, so the effective tax rate is 14% after considering the deduction effect.

b. Current tax assets and liabilities

Current tax assets( recorded as other current assets) Tax refund receivable	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 2,032	2019 $ 1,788

c. Recognized in other comprehensive income

Deferred tax Remeasurement of defined benefit plans	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 50	2019 $ 235

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

2020

Deferred tax assets Temporary differences Obsolete of inventory Others Loss carryforwards Deferred tax liabilities Temporary differences Intangible assets Investment income recognized from foreign investees	Opening Balance Recognized in Profit or Loss Recognized in Other Compre- hensive Income $ 89,699 $ (18,363) $ - 623 (6,011) (50) 90,322 (24,374) (50) 11,423 (11,423) - $ 101,745 $(35,797) $ (50) $ 10,290 $ (2,058) $ - 23,247 21,734 - $ 33,537 $ 19,676 $ -	Closing Balance $ 71,336 (5,438) 65,898 - $ 65,898 $ 8,232 44,981 $ 53,213

This is the translation of the financial statements. CPAs do not audit or review on this translation.

2019

Deferred tax assets Temporary differences Obsolete of inventory Others Loss carryforwards Deferred tax liabilities Temporary differences Intangible assets Investment income recognized from foreign investees	Opening Balance Recognized in Profit or Loss Recognized in Other Compre- hensive Income $ 109,571 $ (19,872) $ - (484) 1,342 (235) 109,087 (18,530) (235) 3,810 7,613 - $ 112,897 $(10,917) $ (235) $ 12,348 $ (2,058) $ - 18,650 4,597 - $ 30,998 $ 2,539 $ -	Closing Balance $ 89,699 623 90,322 11,423 $ 101,745 $ 10,290 23,247 $ 33,537

e. The aggregate amount of temporary difference associated with investments for which deferred tax liabilities have not been recognized

As of December 31, 2020 and 2019, the taxable temporary differences associated with investment in subsidiaries for which no deferred tax liabilities have been recognized were $2,480,872 thousand and $2,742,072 thousand, respectively.

f. Income tax assessments

The Company’s tax returns until 2018 have been assessed by the tax authorities.

23. EARNINGS (LOSS) PER SHARE

EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share Diluted earnings (loss) per share	Unit: NT$ Per Share For the Year Ended December 31
		2020 $ 3.97 $ 3.73	2019 $ (0.63)

The earnings (loss) and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Earnings (loss) used in the computation of basic earnings per share	For the Year Ended	For the Year Ended	December 31
		2020 $1,011,992	2019 $(175,249)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares):

Weighted average number of ordinary shares used in the computation of diluted earnings per share Effect of potentially dilutive ordinary shares: Employee shares buyback program(note) Employee share options (note) The remuneration to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2020 254,897 14,592 569 1,322 271,380	2019 276,714 - - - 276,714

The Company may settle the compensation of employees in cash or shares; therefore, the Company assumes that the entire amount of the compensation will be settled in shares, and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

Note: The Company has a net loss after tax, so there is no dilutive effect in 2019.

24. SHARE-BASED PAYMENT ARRANGEMENTS

The company did not issue any additional employee stock option plan in 2020 and 2019.

The Company’s shareholders’ meeting resolved to issue restricted stocks for employees up to 6,000 thousand shares on June 20, 2020. There was no restricted stock granted to employees by the end of 2020 while the restricted stocks plan was approved by Financial Supervisory Commission on August 12, 2020.

a. Employee stock option plan

Information about vested options of 2020 and 2019 are as following:

Employee Stock Option Plan 2006 2015	December	31,2020 Weighted-aver age remaining contractual life (years) 1.1~2.27 4.67	December	31,2019
	Range of exercise price (NT$) $5.46~36.8 15.9		Range of exercise price (NT$) $4.2~32.10 12.2	Weighted-aver age remaining contractual life (years)
				1.32~3.48 5.67

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Information about outstanding options in 2020 and 2019 is as following:

2020

Employee Stock Option Plan	Beginning	Balance	Options unvested	Options unvested	Options exercised	Options exercised	Options	expired	EndingBalance	EndingBalance
	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)
2006 2015	805,599 677,500	$ 23.49 12.20	- -	$ - -	( 407,400) (242,000)	$ 29.68 14.33	- ( 38,000)	$ - 13.56	398,199 397,500	$ 26.65 15.90

2019

Employee Stock Option Plan	Beginning	Balance	Options unvested	Options unvested	Options exercised	Options exercised	Options	expired	EndingBalance	EndingBalance
	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)
2006 2013 2015	1,594,999 627,250 985,750	$ 19.86 37.90 12.2	- - ( 35,750)	$ - - 12.2	( 660,200) - (272,500)	$ 13.86 - 12.2	( 129,200) (627,250) -	$ 27.80 37.90 -	805,599 - 677,500	$ 23.49 - 12.2

As of December 31, 2020, the valid and outstanding employee stock option plans are as following:

Plan 2006 employee stock option plan 2015 employee stock option plan	Number of Options 12,600,000 2,800,000	Valid Period 10 years 10 years	Vesting Terms
			(1) A certain percentages of the options defined in the plan are vested and exercisable after the first anniversary, or (2) according to the achievement level of the performance target defined in advance. (1) A certain percentage of the options defined in the plan are vested and exercisable after the second anniversary.

For the subsequent changes in the Company’s ordinary share capital, such as issuance of shares in cash, from earnings and capital surplus, consolidation, spin-off, share split, and issuance of global depositary receipts, and decrease in ordinary shares which is not resulted from treasury share retired, the exercise price and the conversion ratio would be considered to adjust accordingly based on the plans.

b. Shares Buy Back Program

Information about the Company buyback its shares as follows:

Items The 2nd Shares Buy Back Program The 3rd Shares Buy Back Program The 4th Shares Buy Back Program	The date of board of directors approved 2016/4/28 2017/5/12 2018/7/26	Buyback shares (In thousand share) 5,000 6,808 8,000	Transferred shares (In thousand share) Adjustment due to capital reduction (In thousand share) 5,000 - 6,808 - 7,848 ( 46 )	Shares not transferred yet (In thousand share) - - 106	Transferred price (in dollar)
					$ 26.53 36.11 33.81 (Adjusted)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Items The 5th Shares Buy Back Program	The date of board of directors approved 2018/8/23	Buyback shares (In thousand share) 7,689	Transferred shares (In thousand share) Adjustment due to capital reduction (In thousand share) 6,544 ( 473 )	Shares not transferred yet (In thousand share) 672	Transferred price (in dollar)
					34.09 (Adjusted)

Information about Shares Buy Back Programs transferred is as follows:

T h e 2 n d S h a r e s B u y B a c k P r o g r a m T h e 3 r d S h a r e s B u y B a c k P r o g r a m

Employee subscription base date 2016/10/28 2017/02/24 2018/02/08 2018/04/24 2018/07/26 2019/05/07 Total	Shares transferred (In Thousands) The fair value of the right to subscribe (NT$) Employee subscription base date 2,624 $ 11.26 2017/07/24 50 11.26 2018/07/26 120 4.20 2019/05/07 255 4.30 1,765 - 186 - 5,000 Total	Shares transferred (In Thousands) 3,198 3,515 95 6,808	The fair value of the right to subscribe (NT$)
			$ 12.85 - -

T h e 4 t h S h a r e s B u y B a c k P r o g r a m T h e 5 t h S h a r e s B u y B a c k P r o g r a m

Employee subscription base date 2020/03/20 Total	Shares transferred (In Thousands) The fair value of the right to subscribe (NT$) Employee subscription base date 7,848 $ 3.30 2019/05/07 2019/11/08 2020/03/20 2020/11/06 7,848 Total	Shares transferred (In Thousands) 4,651 60 1,399 434 6,544	The fair value of the right to subscribe (NT$)
			$ - - 3.70 1.90

The limitations and rights on the unvested shares were as follows:

1) The employees cannot sell, pledge, transfer, donate, or dispose these shares.
2) The Company and the employees should enter into a trust agreement with a trust and custodian institution and authorize the institution to exercise the shareholders’ rights including but not limited to attendance, proposing, speaking and voting in the shareholder meetings.
3) The unvested shares are entitled to receive cash and/or share dividends and the derivatives.

If an employee fails to meet the vesting conditions, the trust institution would dispose the unvested shares and return proceeds to the employee no more than the original purchase price.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

c. Options of the share transfer plan granted were measured by using the Black-Scholes pricing model

Compensation cost recognized for share-based payments above in 2020 and 2019 were as follows:

Employee share option plans Shares buyback program Capital surplus - employee share options	For the Year Ended	For the Year Ended	December 31
	2020 $ - $ 12,433 $ 12,433 For the Year Ended		2019 $ 241 $ 4,693 $ 4,934 December 31
		2020 $ 12,433	2019 $ 4,934

25. Equity transactions with non - controlling interests

In November 2019, the Company ownership interest over FocalTech Smart Sensors, Ltd. increase to 50.06% from 42.34% Due to capital injection and no pro rata subscription in new shares.

The transactions did not change the controlling status. FocalTech Smart Sensors, Ltd. was treated as a subsidiary under equity method.

26. OPERATING LEASE ARRANGEMENTS

The Company is Lessee

The Company and its subsidiaries have lease contracts for office, plant and some office equipment, which would be expired before September 2021. Above mentioned lease contracts are short-term lease agreement, and the Company applies practical expedients so the Company does not recognize right-of-use assets and lease liabilities. The amount of short-term commitment which the Company apply practical expedients is $9,140 thousand.

The lease payments recognized in profit or loss for the current period was as follows:

lease payment	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 22,726	2019 $ 23,150

27. CAPITAL MANAGEMENT

The capital structure of the Company consists of debt and equity .The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stockholders through the optimization of the debt and equity balance.

To define the strategy of the Company’s capital structure, the Company first sets its target market share according to the industry scale, the growth of the industry and the product roadmap. Based on the projected market position, the Company plans the research and development investment and capital expenditure. Furthermore, the Company calculates working capitals and cash demands based on the long-term development plan considering the industry characteristics to build up the overall operating model. Finally, the Company evaluates not only the possible contribution margin, operating profit ratio and cash flows according to the product competitiveness but also risk factors such as the fluctuation of the business circle and the life circle of the product to decide the suitable capital structure. The management reviews capital structures periodically and considers the possible costs and risks of different capital structures. Generally,

This is the translation of the financial statements. CPAs do not audit or review on this translation.

the Company adopted prudent capital management strategy.

The Company was not restricted to other external capital requirements.

28. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities not measured of fair value approximate their fair values or cannot be reliably measured.

b. Fair value of financial instruments that are measured at fair value on a recurring basis
1.) Fair value hierarchy

December 31, 2020

Financial asset at FVTPL Listed preferred shares Private funds Total December 31, 2019 Financial asset at FVTPL Listed preferred shares Private funds Total	Level 1 $ 72,186 - $ 72,186 Level 1 $ 10,931 - $ 10,931	Level 2 $ - - $- Level 2 $ - - $-	Level 3 $ - 24,953 $ 24,953 Level 3 $ - 16,918 $ 16,918	Total $ 72,186 24,953 $ 97,139 Total $ 10,931 16,918 $ 27,849

There were no transfers between Level 1 and Level 2 in 2020 and 2019.

2) Reconciliation of financial instruments measured by Level 3 fair value

Financial assets at FVTPL Balance, beginning of year Purchases Disposals Recognized in profit or loss(other income or loss) Balance, end of year	For the Years Ended in December 31	For the Years Ended in December 31
	(	2020 2019 $ 16,918 $ 11,589 10,000 5,355 - ( 7 ) 1,965) ( 19) $ 24,953 $ 16,918

3) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement

The unlisted equity investment is measured by the market approach, which decides fair value by referring to the recent financing activities of investees or the market transaction prices and status of the similar companies. The Company had carefully evaluated and selected the suitable evaluation method, but the use of different evaluation models or fair values may result in different evaluation results.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

c. Categories of financial instruments

Financial assets Fair value through profit or loss (FVTPL) Mandatorily at FVTPL Amortized cost (Note 1) Financial liabilities Amortized cost (Note 2)	December 31
	2020 2019 $ 97,139 $ 27,849 4,217,596 1,494,534 3,238,131 1,009,049

1) The amounts include financial instruments measured at amortized cost, which comprise cash and cash equivalents, trade receivables, other financial assets and refundable deposits which is booked in other non-current assets.
2) The balances included financial liabilities measured at amortized cost, which comprise trade and other payables and deposits received.
d. Financial risk management objectives and policies

The Company’s major financial instruments include cash and cash equivalents, trade receivable, other financial assets, financial assets at FVTPL, trade and other payables. The Company’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The board of directors is solely responsible for established and monitored the framework of risk management of the Company, the board of directors authorized the chairman develop and monitored the risk management policy of the Company with the operation center of the Group, and regularly reported the situation to the board of directors.

The Company’s financial risk management policies are developed for identifying and analyzing the financial risks to the Company, evaluating the impacts of the financial risks, and executing the financial-risk aversion policies. The financial risk management is periodically reviewed to reflect changes to the market and the operations. Through the internal controls, such as training and setting up managing requirements and procedures, the Company is engaged in developing a disciplined and constructive control environment, in order to have all employees understand own responsibilities.

The Company’s board of directors monitors the management on managing the compliance to the financial risk management policies and procedures and reviews the appropriateness of risk management structure. To assist the board of directors, the internal auditors perform period and exceptional reviews on the controls and procedures of financial risk management and report the result of reviews to the board of directors.

1) Market risk

The major financial risks from the Company’s operation were foreign currency exchange risk referred to i) and interest rate risk referred to ii).

i) Foreign currency risk

This is the translation of the financial statements. CPAs do not audit or review on this translation.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities which were not in the same functional currency with the Company at the end of the reporting period are shown in Note 31.

Sensitivity analysis

The Company was mainly exposed to the U.S. dollar. The following table details the Company’s sensitivity to a 5% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below indicates a decrease in pre-tax profit and other equity associated with New Taiwan dollars strengthen 5% against the relevant currency. For a 5% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on pre-tax profit and other equity and the balances below would be negative.

Profit or loss/ equity	USD Impact	USD Impact	USD Impact
	For the Year Ended December 31
		2020 $ 67,415(i)	2019 $ 29,008(i)

(1).This was mainly attributable to the exposure of outstanding USD including trade receivables, trade payables, other payables, other current assets and other current liability.

ii) Interest rate risk

The Company was exposed to interest risk arising from fixed rate time deposits, other financial assets and floating rate demand deposits. The time deposits were at fixed interest rates, and other financial assets were at fixed rates or with guaranteed minimal interest rates and carried at amortized costs, and, therefore, the variations to interest rates did not affect future cash flows.

The carrying amount of the Company’s financial assets with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets		December 31	December 31
		2020 $ 170,880 $ 480,000 $ 2,454,853	2019 $ 419,720 $ - $ 421,333

Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25 basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 25 basis points higher/lower and the Company hold all variables

This is the translation of the financial statements. CPAs do not audit or review on this translation.

constantly, the Company’s post-tax profit for the year ended December 31, 2020 and 2019 would decrease/increase by $6,137 thousand and $1,053 thousand, respectively.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure of counterparties to discharge an obligation from the carrying amounts of the financial assets as recognized in the balance sheets.

The Company’s concentration of credit risk was related to the five largest clients of trade receivables. Ongoing credit evaluation is performed on the financial condition of trade receivables.

As of December 31, 2020, the Company’s five largest customers took 69% of total trade receivables, the remaining transactions with a large number of unrelated customers, thus, no significant concentration of credit risk was observed.

3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, bank loans are a significant resource of liquidity for the Company.

As of December 31, 2020 and 2019, the available unutilized short-term bank loan facilities refer to (ii) Financing facilities.

i) Liquidity and interest risk rate tables for non-derivative financial liabilities

The Company’s remaining contractual maturity for its financial liabilities was based on the undiscounted cash flows, including interest and principal cash flow, of financial liabilities from the earliest date on which the Company can be required to pay.

December 31, 2020 On Demand or Less than 1 Year Non-interest bearing $ 2,275,649 Fixed interest rate liabilities 480,206 $ 2,755,855 December 31, 2019 On Demand or Less than 1 Year Non-interest bearing $ 891,455	1-5 Years $ 482,276 - $ 482,276 1-5 Years $ 117,594

This is the translation of the financial statements. CPAs do not audit or review on this translation.

ii) Financing facilities

Unsecured bank lines of credit Amount used Amount unused	December 31, 2020 $ 495,665 204,335 $ 700,000	December 31, 2019 $ - 800,000 $ 800,000

29. TRANSACTIONS WITH RELATED PARTIES

Except for information disclosed elsewhere in the other notes, details of transactions between the Company and other related parties are disclosed below.

a. Related party name and category

Related Party Name FocalTech Systems, Ltd. FocalTech Electronics, Ltd. FocalTech Smart Sensors, Ltd.	Related Party Category
	Subsidiary Subsidiary Subsidiary

b. Sales of goods

Line Item Related Party Category/Name Sales Subsidiaries FocalTech Systems, Ltd. Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 43,670 - $ 43,670	2019 $ 433,048 23,070 $ 456,118

The Company provided research and development and manufacturing management services and charged for revenues according to contracts.

c. Purchases of goods

Line Item Related Party Category/Name Subsidiaries Purchase FocalTech Electronics, Ltd. Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ - 46,550 $ 46,550	2019 $ 243,174 - $ 243,174

Purchases were made by the Company at market prices and conditions similar with the non-related parties.

d. Payables to related parties

Line Item Related Party Category/Name Subsidiaries Trade payables FocalTech Electronics, Ltd. Others		December 31	December 31
		2020 $ 518,851 20,359 $ 539,210	2019 $ 19,063 13,367 $ 32,430

The outstanding trade payables to related parties are unpledged.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

e. Prepayments (accounted for other current assets)

Line Item Related Party Category/Name Subsidiaries Prepayments FocalTech Smart Sensors, Ltd. Advances (accounted for other current liabilities) Line Item Related Party Category/Name Subsidiaries Advances FocalTech Systems, Ltd.		December 31	December 31
		2020 2019 $ 85,440 $ - December 31
		2020 $ 247,263	2019 $ 154,595

f. Advances (accounted for other current liabilities)

The Company accounted for service revenue from related parties in advance.

g. Other transactions with related parties

The Company provides guarantee services to its subsidiaries, and charged for 802 thousand service revenue in 2019. Please refer to Table 2.

h. Compensation of key management personnel

Long-term employee benefits Short-term employee benefits Post-employment benefits Share-based payments	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 15,450 40,107 459 2,689 $ 58,705	2019 $ 16,646 29,618 540 1,990 $ 48,794

30. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACTUAL COMMITMENTS

FocalTech Electronics, Ltd., a subsidiary of the Company, filed a litigation of patent infringement against Novatek Microelectronics Corp. in September 2018 .As of the report issue date, the result of litigation and the effect on financial statements still could not be inferred.

31. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the group entities and the exchange rates between foreign currencies and respective functional currencies were disclosed.

The significant assets and liabilities denominated in foreign currencies were as follows:

December 31, 2020

		Foreign	Exchange Rate	Carrying
	Currencies			Amount
Financial assets
Monetary items
USD	$	144,584	28.48 (USD:NTD)	$ 4,117,740

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Monetary items
USD		159,307	28.48 (USD:NTD)	4,573,073
Financial liabilities
Monetary items
USD		97,242	28.48 (USD:NTD)	2,769,444
December 31, 2019
		Foreign	Exchange Rate	Carrying
	Currencies			Amount
Financial assets
Monetary items
USD	$	51,829	29.980 (USD:NTD)	$ 1,553,825
Monetary items
USD		170,831	29.980 (USD:NTD)	5,121,499
Financial liabilities
Monetary items
USD		32,477	29.980 (USD:NTD)	973,667

32. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others (Table 1)
2) Endorsements/guarantees provided (Table 2)
3) Marketable securities held (excluding investments in subsidiaries, associates and joint ventures) (Table 3)
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital (None)
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital (None)
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital (None)
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital (None)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (None)
9) Trading in derivative instruments (None)
10) Information on investees (Table 4)
b. Information on investments in mainland China

This is the translation of the financial statements. CPAs do not audit or review on this translation.

1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 5)
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: (None)
c. Information of major shareholder

List of all shareholders with ownership of 5 percent or greater showing the names and the number of shares and percentage of ownership held by each shareholder: (Table 6)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 1

FocalTech Systems Co., Ltd.

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2020 (Amounts in Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note 1)	Financing Company	Counter-party	Financial Statement Account	Related Party	Maximum Balance for the Period (Note 4)	Ending Balance (Note 4)	Amount Actually Drawn	Interest Rate	Nature for Financing	Transaction Amounts	Reason for Financing	Allowance for Bad Debt	Collateral	Collateral	Financing Limits for Each Borrowing Company (Note 2)	Financing Company’s Total Financing Amount Limits (Note 2)	Note
													Item	Value
1	Focaltech Systems, Ltd.	FocalTech Systems Co., Ltd.	Other receivables	Yes	$ 1,708,800 ( USD 60,000 )	$ 1,708,800 ( USD 60,000 )	$ -	-	The need for short-term financing	$ -	Operating capital	$ -	-	$ -	$ 2,922,964	$ 2,922,964	Note 3

Note 1: The items are numbered as follows:
a. Issuer is numbered as “0”.
b. Investee companies are numbered from “1”.
Note 2: The maximum amount for financing provided to others:
a. The maximum amount of financing provided by the Company and its subsidiaries shall not exceed 20% of total of the Company and its subsidiaries’ net worth.
b. The maximum amount of financing provided by the Company and its subsidiaries to each individual is as follows:

i. The maximum amount of financing provided to all businesses shall not exceed 20% of the Company’s net worth. The maximum amount of financing provided to an individual shall not exceed 10% of the lending company’s net worth, 30% of the borrowing company’s net worth, or the gross transaction amount (the higher of purchase amount or sales amount between the two parties) for the past year.

ii. In the case of financing companies with short-term financing needs, the total maximum amount of financing provided to such companies shall not exceed 20% of the lending company net worth; the maximum amount of financing provided to an individual shall not exceed 10% of the lending company’s net worth or 30% of the borrowing company’s net worth.

c. The maximum amount of financing provided by the Company and its 100% owned subsidiaries shall not exceed 100% of the Company’ net worth.
d. Net worth is based on latest financial statements audited or reviewed by independent auditors. The Company prepared financial report according to IFRSs, The Company’s net worth is the amount attributed to parent’s equity in the Company’s balance sheet.

Note 3: The exchange rate is US$1=$28.48 on December 31, 2020.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 2

FocalTech Systems Co., Ltd.

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note 1)	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Note 2)	Maximum Amount Endorsed/ Guaranteed During the Period (Note 6)	Outstanding Endorsement/ Guarantee at the End of the Period (Note 6)	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Note)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Relationship
0	FocalTech Systems Co., Ltd.	FocalTech Systems, Ltd. FocalTech Electronics, Ltd. Hefei PineTech Electronics Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Smart Sensors Co., Ltd. FocalTech Smart Sensors, Ltd.	A subsidiary in which the Parent Company holds directly and indirectly over 50% of an equity interest.	$3,906,421 $3,906,421 $3,906,421 $3,906,421 $3,906,421 $3,906,421	$ 1,281,600 ( USD 45,000) 1,298,810 ( USD 45,604) 1,281,600 ( USD 45,000) 1,737,280 ( USD 61,000) 199,680 99,680 ( USD 3,500)	$ 1,281,600 ( USD 45,000) 1,298,810 ( USD 45,604) 1,281,600 ( USD 45,000) 1,737,280 ( USD 61,000) 199,680 99,680 ( USD 3,500)	$9,398 3,097 - 19,638 - -	$ - - - - - -	16.4% 16.62% 16.4% 22.24% 2.56% 1.28%	$3,906,421 3,906,421 3,906,421 3,906,421 3,906,421 3,906,421	Y Y Y Y Y Y	N N N N N N	N N Y Y N N	(Note 3) (Note 3) (Note 3) (Note 3) (Note 4 and 5) (Note 4)

Note 1: The items are numbered as follows:
a. Issuer is numbered as “0”.
b. Investee companies are numbered from “1”.
Note 2: The maximum amount for guarantees provided to others:
a. The Company provides guarantees due to business, the amount shall not exceed as follows.
b. The maximum amount of guarantees provided to all subsidiaries and an individual shall not exceed 50% of the Company’s net worth.
c.
The maximum amount of guarantees provided between subsidiaries shall not exceed 100% of the Company’s net worth.
d. The total amount of guarantees of the Company and its subsidiaries shall not exceed 50% of the Company’s net worth. The maximum amount of guarantees provided to an individual by the Company and its subsidiaries shall not exceed 50% of the Company’s net worth.
e. Net worth is based on the latest financial statements audited or reviewed by independent auditors. The Company prepared financial report according to IFRSs, The Company’s net worth is the amount attributed to parent’s equity in the Company’s balance sheet.

Note 3: The Company provides USD 45,000 thousand sharing guarantee to FocalTech Electronics, Ltd., FocalTech Systems, Ltd., Hefei PineTech Electronics Co., Ltd. and FocalTech Electronics (Shenzhen) Co., Ltd. to purchase materials. 3,097 thousand, 9,398 thousand, 0 thousand and 1,304 thousand were used in this period.

Note 4: The Company provides USD 3,500 thousand sharing guarantee to both FocalTech Smart Sensors, Ltd. and FocalTech Smart Sensors Co., Ltd. to purchase materials. There is no actual usage in this period.

Note 5: The Company provides $100,000 thousand guarantee for common financing usages.

Note 6: The exchange rate is US$1=$28.48 and RMB=$4.3648 on December 31, 2020.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 3

FocalTech Systems Co., Ltd.

MARKETABLE SECURITIES HELD DECEMBER 31, 2020

(Amounts in Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		December 31, 2019	December 31, 2019		Note
				Shares	Carrying Value	Percentage of Ownership	Fair Value
FocalTech Systems Co., Ltd.	Shares Fubon Financial Holding Co., Ltd. Preferred Shares B WT MICROELECTRONICS CO., LTD. Preferred Shares A Beneficiary certificates CDIB Capital Growth Partners CDIB Capital Healthcare Ventures II	- - -	Financial assets at fair value through profit or loss – non-current Financial assets at fair value through profit or loss – non-current Financial assets at fair value through profit or loss – non-current Financial assets at fair value through profit or loss – non-current	170,000 1,268,000 - -	$ 10,625 61,561 20,016 4,937	0.03% 0.94% 0.66% 0.96%	10,625 61,561 20,016 4,937

Note 1: The percentage of ownership is calculated by preferred shares the Company owned divided by outstanding preferred shares.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 4

FocalTech Systems Co., Ltd.

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2020 (Amounts in Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of December 31, 2020	As of December 31, 2020	As of December 31, 2020	Net Income (Loss) of the Investee	Share of Profit (Loss) of the Investee	Note
				December 31, 2020	December 31, 2019	Shares	Percentage of Ownership	Carrying Amount
FocalTech Systems Co., Ltd. FocalTech Electronics Co., Ltd. FocalTech Smart Sensors, Ltd. FocalTech Corporation, Ltd. FocalTech Systems, Inc. FocalTech Systems, Ltd.	FocalTech Corporation, Ltd. FocalTech Electronics, Ltd. FocalTech Smart Sensors, Ltd. Vitrio Technology Corporation FocalTech Smart Sensors, Ltd. FocalTech Smart Sensors Co., Ltd. FocalTech Systems, Inc. FocalTech Systems, Ltd. FocalTech Electronics Co., Ltd.	Cayman Islands Cayman Islands Cayman Islands Taiwan Cayman Islands Taiwan U.S. Cayman Islands Taiwan	Investment activity Investment activity Investment activity Research, development, manufacturing and sale of integrated circuits Investment activity Research, development, manufacturing and sale of integrated circuits Investment activity Investment activity Import and export of integrated circuits	TWD 7,059,264 TWD 2,848 (USD 100) - TWD 4,970 TWD 238,821 TWD 11,990 TWD 2,913,300 (USD 102,293) TWD 665,010 (USD 23,350) TWD 20,000	TWD 7,059,264 TWD 452,698 (USD 15,100) TWD 205,305 - TWD 33,516 TWD 11,990 TWD 3,066,740 (USD 102,293) TWD 700,035 (USD 23,350) TWD 20,000	5,491 (in thousand) 2 - 142 (in thousand) 18,813 (in thousand) 17,417 (in thousand) 100 2 2,000 (in thousand)	100% 100% - 50% 67.15% 100% 100% 100% 100%	TWD 2,974,195 ( USD 104,431 ) TWD 1,562,878 ( USD 54,876 ) - - ( TWD 2,828 ) ( USD 99 ) ( TWD 202,039 ) TWD 2,849,019 ( USD 100,036 ) TWD 2,922,964 ( USD 102,632 ) TWD 144,340 ( USD 5,068 )	TWD 26,164 ( USD 885 ) TWD 2,732 ( USD 92 ) (TWD 86,850 ) ( USD 2,939 ) (TWD 5,769 ) (TWD 86,850 ) ( USD 2,939 ) (TWD 62,102 ) TWD 35,774 (USD 1,211 ) TWD 34,840 (USD 1,179 ) (TWD 20,731 ) (USD 702 )	TWD 26,164 (USD 885 ) TWD 2,732 (USD 92 ) (TWD 39,998 ) (USD 1,354 ) (TWD 4,970 ) (TWD 18,322 ) (USD 620 ) (TWD 62,102 ) TWD 35,774 (USD 1,211 ) TWD 34,840 (USD 1,179 ) (TWD 20,731 ) (USD 702 )	Subsidiaries Subsidiaries Subsidiaries (Note 5) Joint venture Subsidiaries (Note 5) Subsidiaries Subsidiaries Subsidiaries Subsidiaries

Note 1: Information of investments in mainland China is listed in Table 6.

Note 2: The exchange rate is US$1=$28.48 on December 31, 2020.

Note 3: The exchange rate is US$1=$29.98 on December 31, 2019.

Note 4: The average exchange rate average rate US$1=$29.5492 during 2020/1/1~2020/12/31.

Note 5: FocalTech Smart Sensors, Ltd. is owned solely by FocalTech Electronics Co., Ltd. which was held by The company and FocalTech Electronics Co., Ltd.. The original investment amount of FocalTech Electronics Co., Ltd. includes the amount invested by the Company.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 5

FocalTech Systems Co., Ltd.

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2020 (Amounts in Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Paid-in Capital `（`Note 1`）`	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2020 (Note 1)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2020 (Note 1)	Net Income (Loss) of the Investee (Note 2)	Percentage of Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 2)	Carrying Amount as of December 31, 2020 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2020	note
					Outward	Inward
FocalTech Electronics (Shanghai) Co., Ltd. FocalTech Electronics (Shenzhen) Co., Ltd. FocalTech Systems (Shenzhen) Co., Ltd. Hefei PineTech Electronics Co., Ltd.	Sales support and post-sales service for affiliates’ IC products Design and research of integrated circuits Design and research of integrated circuits Research, development and sale of integrated circuits	TWD 56,960 ( USD 2,000 ) TWD 65,504 ( USD 2,300 ) TWD1,053,764 ( USD 37,000 ) TWD 130,944 ( RMB 30,000 )	`（`Note 3and 4`）` `（`Note 3`）` `（`Note 4`）` `（`Note 4`）`	TWD 28,480 ( USD 1,000 ) TWD 28,480 ( USD 1,000 ) - -	$ - - - -	$ - - - -	TWD 28,480 ( USD 1,000 ) TWD 28,480 ( USD 1,000 ) - -	TWD 2,032 ( USD 69 ) TWD 13,801 ( USD 467 ) TWD 20,761 ( USD 703 ) TWD 57,091 ( USD 1,932 )	100% 100% 100% 100%	TWD 2,032 ( USD 69 ) TWD 13,801 ( USD 467 ) TWD 20,761 ( USD 703 ) TWD 57,091 ( USD 1,932 )	TWD 35,750 ( USD 1,255 ) TWD 58,274 ( USD 2,046 ) TWD1,227,307 ( USD 44,849 ) TWD 217,145 ( USD 7,624 )	$

Accumulated Outward Remittance for Investment Investment Amount Authorized by Investment Upper Limit on the Amount of Investment in Mainland China as of December 31, 2020 Commission, MOEA Stipulated by Investment Commission, MOEA $56,960 $1,722,104 $4,687,707 (US$2,000) (US$60,467)

Note 1: The exchange rate is US$1=NT$29.48 and RMB$1=$4.3648 on December 31, 2020.

Note 2: The average exchange rate is US$1=NT$29.5492 and RMB$1=4.2827 on December 31, 2020.

Note 3: The Company founded a subsidiary in other area and then invested in mainland china.

Note 4 It was founded by the oversea subsidiary, so the paid-in capital did not remit from Taiwan.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

TABLE 6

FocalTech Systems Co., Ltd.

INFORMATION ON MAJOR SHAREHOLDERS DECEMBER 31, 2020

Shareholders	Shares
	Total Shares Owned	Ownership Percentage
Egis Technology Inc.	33,966,575	16.14%

Note 1: Major shareholders showed in the list above include those owned the ownership of 5 percent or more.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FocalTech Systems Co., Ltd.

THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS

Item
Major Accounting Items in Assets, Liabilities and Equity
Major accounting items in assets, liabilities and equity
Statement of cash and cash equivalents
Statement of accounts receivable, net
Statement of inventories
Statement of changes in property, plant and equipment
Statement of changes in accumulated depreciation of property, plant and
equipment
Statement of changes in intangible assets
Statement of deferred tax assets
Statement of changes in investments accounted for using equity method
Statement of short-term loans
Statement of accounts payables
Major accounting items in profit or loss
Statement of revenues
Statement of operating costs
Statement of operating expenses
Statement of employee benefit, depreciation and amortization by function

**Statements Index **

1
2
3
Note 12
Note 12
Note 14
Note 22
4
5
6
7
8
9
10

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 1

FocalTech Systems Co., Ltd.

STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item Description Petty cash and cash on hand Including EUR 3 thousand @35.02, HKD 3 thousand @3.673,RMB 7 thousand @4.3648 , JPY 530 thousand @0.2763 ,USD 1 thousand @28.48 and NTD 50 thousand Cash in banks Checking accounts and current accounts Foreign currency current accounts Including USD 80,518 thousand @28.48 ,JPY 3,976 thousand @0.2763 and EUR 5 thousand @35.02	Amount $ 381 161,123 2,294,422 2,455,545 $ 2,455,926

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 2

FocalTech Systems Co., Ltd.

STATEMENT OF ACCOUNTS RECEIVABLE, NET DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item Client A Client B Client C Client D Client E Others (Note) Less: Allowance for doubtful accounts	Amount $ 319,286 234,958 184,242 153,181 99,186 454,333 1,445,186 - $ 1,445,186

Note: The amount of each individual client included in others does not exceed 5% of the account balance.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 3

FocalTech Systems Co., Ltd.

STATEMENT OF INVENTORIES DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item Finished goods Work in process Raw materials	Amount
	Book value Net Realizable Value $ 311,159 $ 441,489 812,109 1,099,771 92,013 116,291 $1,215,281 $1,657,551

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 4

FocalTech Systems Co., Ltd.

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investees Unlisted companies FocalTech Corporation, Ltd. FocalTech Electronics, Ltd FocalTech Smart Sensors, Ltd. Vitrio Technology Corporation	Balance, January 1, 2020 Shares (In thousand) Amount 5,491 $3,002,990 3 shares 2,071,743 14,025 46,766 - - $5,121,499	Additions in Investment Shares (In thousand) Amount - $ - - - - - 142 4,970 $ 4,970	Share of Decrease in Investment Profit (Loss) Other Amount of the Comprehen- sive Shares (In thousand) (Note) Investee Income - $ - $ 26,164 $ (63,805) ( 1) ( 451,200) 2,732 (60,397) ( 14,025) ( 2,847) (39,998) (3,921) - ( -) (4,970) - $(454,047) $ (16,072) $(128,123)	Other Adjustment $ 8,846 - - - $ 8,846	Balance, December 31, 2019 Percentage of Ownership Shares (%) Amount Collateral Note 5,491 100 $2,974,195 Nil Note1 2 shares 100 1,562,878 Nil - - - 142 50 - Nil $4,537,073
		Shares (In thousand) - - - 142	Shares (In thousand) - ( 1) ( 14,025) -
	Shares (In thousand) 5,491 3 shares 14,025 -

Note 1 : Other adjustment is compensation cost of employee share options, $8,846 thousand .

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 5

FocalTech Systems Co., Ltd.

STATEMENT OF SHORT-TREM LOANS DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars)

Type Bank credit loan Mega Bank Far Eastern Int'l Bank Land Bank of Taiwan Total	Balance, End of Year $ 100,000 280,000 100,000 $ 480,000	Contract Period 2020/10/23~ 2021/4/21 2020/12/14~ 2021/1/14 2020/12/14~ 2021/1/14	Range of Interest Rates (%) 0.88 1.00 1.06		Credit Amounts $ 200,000 300,000 200,000 $ 700,000	Collateral
						Nil Nil Nil

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 6

FocalTech Systems Co., Ltd.

STATEMENT OF ACCOUNTS PAYABLES DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item Account payable-related party FocalTech Electronics, Ltd. Others(Note) Account payable-others Vendor A Vendor B Vendor C Vendor D Vendor E Vendor F Others (Note)	Amount $ 518,851 20,359 539,210 $ 330,715 259,208 238,294 188,063 163,205 152,842 64,762 1,397,089 $1,936,299

Note: The amount of each individual vendor included in others does not exceed 5% of the account balance.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 7

FocalTech Systems Co., Ltd.

STATEMENT OF REVENUES FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item Quantity (in thousand units) Net sales IC for human and machine interface devices 307,299 Service revenue - Less: Sales discounts Sales returns	Amount $ 11,458,620 43,670 85,122 6,818 $ 11,410,350

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 8

FocalTech Systems Co., Ltd.

STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item
Raw materials, beginning of year

Raw materials purchased
Transferred to expenses

Raw materials balance, end of year

Raw materials used
Manufacturing expenses

Manufacturing cost
Work in process, beginning of year
Transferred to expenses and others

Work in process, end of year

Cost of finished goods
Finished goods, beginning of year
Finished goods purchased
Transferred to expenses and others

Finished goods, end of year

Operating costs

Amount
$ 114,484
6,997,513
(
17,606)
(
92,013)
7,002,378

2,484,530
9,486,908
304,486
(
88,211)
(
812,109)
8,891,074
198,145
217,121
(
183,635)
(
311,159)
$ 8,811,546

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 9

FocalTech Systems Co., Ltd.

STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

			General and	Research and
			Administrative	Development
Item	Selling Expenses		Expenses	Expenses
Payroll	$ 121,997		$ 100,368	$ 480,560
Rent expense		-	22,551	-
Freight		10,677	127	1
Mask expense		-	-	117,077
Consumables		-	-	126,710
Sample expense		26,364	-	-
Welfare		-	11,814	-
Professional service fees		10,012	23,434	10,864
Management fees of the Science Park Administration		-	22,139	-
Others (Note)		17,521	45,139	223,655
	$ 186,571		$ 225,572	$ 958,867

Note: Expected credit loss is included and the amount of each item in others does not exceed 5% of the account balance.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

STATEMENT 10

FocalTech Systems Co., Ltd.

STATEMENT OF EMPLOYEE BENEFIT, DEPRECIATION AND AMORTIZATION BY FUNCTION FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

Employee benefit Salary and bonus Labor and health insurance Pension Board compensation Others Depreciation Amortization	2020	Total $ 768,593 40,856 25,959 14,230 22,626 $ 872,264 $ 10,567 $ 15,609	2019
	Classified as Operating Costs Classified as Operating Expenses $ 78,898 $ 688,695 7,200 33,656 5,170 20,789 - 14,230 2,318 20,308 $ 94,586 $ 777,678 $ 722 $ 9,845 $ - $ 15,609		Classified as Operating Costs Classified as Operating Expenses $ 69,508 $ 521,549 6,842 34,129 4,642 21,994 - 6,400 2,205 11,719 $ 83,197 $ 595,791 $ 1,299 $ 12,987 $ - $ 16,254	Total $ 591,057 40,971 26,636 6,400 13,924 $ 678,988 $ 14,286 $ 16,254

Note 1: In 2020 and 2019, the Company had 392 and 396 employees, respectively. There were 7 and 6 non-employee directors, respectively.

Note 2: Listed Company at Taiwan Stock Exchange and over-the-counter company at Taipei Exchange should disclose additional information below:
a. The average amount of employee benefit for the years ended December 31, 2020 and 2019 was NT$2,229 thousand and NT$1,725 thousand, respectively.
- (“Total employee benefit - Total board compensation”/“Total employee headcount - Total non-employee director headcount”)
b. The average amount of salary and bonus for the years ended December 31, 2020 and 2019 was NT$1,996 thousand and NT$1,516 thousand, respectively.

(Total salary and bonus/“Total employee headcount - Total non-employee director headcount”)

c. The average salary and bonus increased by 31.73% year over year.

(“Average salary and bonus in current year - Average salary and bonus in previous year”/Average salary and bonus in previous year)

d. The Company did not have supervisors for the years ended December 31, 2020 and 2019. Therefore, there was no compensation to the supervisors.
e. The compensation paid to board of directors and the executive officers is based on their contribution and market trends. It is reviewed by the Compensation Committee. The compensation paid to the employees is based on their contribution and market trends.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

AI assistant

FocalTech — Annual Report 2020

52342_rns_2020-11-13_82bb4784-df68-4250-b43e-36f4d73445f7.pdf

FocalTech Systems Co., Ltd. Financial Statements for the Years Ended December 31, 2020 and 2019

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Sales Revenue

Responsibilities of Corporate Management and Governance hierarchy For the Financial Statements

Auditors’ Responsibilities for the Audit of the Financial Statements

FOCALTECH SYSTEMS CO., LTD. BALANCE SHEETS DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Par Value)

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

FOCALTECH SYSTEMS CO., LTD. STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

FOCALTECH SYSTEMS CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

FOCALTECH SYSTEMS CO., LTD.

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

e. Inventories

g. Property, plant and equipment

1) Financial assets

ii) Impairment of financial assets

iii) Derecognition of financial assets

2) Equity instruments

3) Financial liabilities

m. Revenue recognition

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Impairment of Goodwill

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS-NON-CURRENT

8. OTHER FINANCIAL ASSETS

9. TRADE RECEIVABLES, NET

December 31, 2020

10. INVENTORIES

11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

11. PROPERTY, PLANT AND EQUIPMENT

13. GOODWILL

14. OTHER INTANGIBLE ASSETS

15. SHORT-TERM BORROWINGS

16. TRADE PAYABLES

17. OTHER PAYABLES

18. RETIREMENT BENEFIT

a. Defined contribution plans

b. Defined benefit plans

employees and directors.

20. REVENUE

d. The remuneration to employees and directors

22. INCOME TAXES

b. Current tax assets and liabilities

c. Recognized in other comprehensive income

d. Deferred tax assets and liabilities

2020

23. EARNINGS (LOSS) PER SHARE

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares):

24. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee stock option plan

2019

b. Shares Buy Back Program

25. Equity transactions with non - controlling interests

26. OPERATING LEASE ARRANGEMENTS

The Company is Lessee

27. CAPITAL MANAGEMENT

28. FINANCIAL INSTRUMENTS

1) Market risk

Sensitivity analysis

Sensitivity analysis

2) Credit risk

3) Liquidity risk

ii) Financing facilities

29. TRANSACTIONS WITH RELATED PARTIES

e. Prepayments (accounted for other current assets)

30. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACTUAL COMMITMENTS

FocalTech Annual Report 2020